July 12, 2012 (PLANSPONSOR.com) - During the American Society of Pension Professionals & Actuaries’ Northeast Area Benefits Conference, speakers reviewed common administrative filing and Voluntary Correction Program (VCP) submission mistakes.
Under the Internal Revenue Service’s (IRS) VCP, retirement plan sponsors can correct mistakes in their plans. Scott Feldman, group manager of the Employee Plans Voluntary Compliance Unit of the Northeast/Mid-Atlantic, emphasized that if a plan sponsor discovers an operational or form failure, that sponsor should immediately make a correction.
“You want to be very careful that you’re doing self-auditing, and you’re making corrections when you find [mistakes],” said Ken Aufsesser, esq. at Ferguson, Aufsesser, Hollowell & Wrynn LLP. That way if the IRS performs an examination, it will substantially reduce the penalty, Aufsesser added.
Most IRS audits are based on Form 5500 mistakes, he said. Common errors in filing and VCP submissions include:
Common Administrative Filing Errors
- Compliance fee not paid or incorrect amount submitted;
- Penalty of Perjury Statement not completed properly;
- Social security number used instead of employee identification number;
- Plan assets/number of participants not complete;
- Abusive Tax Avoidance Transaction (ATAT) box not checked;
- Each page does not have proper header;
- Appendix/Schedules are changed, non-applicable sections are deleted; and
- Enforcement Resolution section completed by applicant (should be left blank).